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How NRI Sell Property in India?

How NRI Sell Property in India?

NRI can  buy all types of properties except a farm house, an agricultural land or a plantation property. However, to either of those properties that are tax exempted in India, they need to get the approval from the Reserve Bank of India (RBI) and the government. The RBI has granted permission to banks and housing finance companies that are registered with the National Housing Bank to offer loans to NRIs for purchasing residential properties in India. Loan, sanctioned in Indian currency, has to be repaid in the same currency. However, the loan amount, as per the regulations, cannot be credited directly to the NRI’s bank account, and needs to be disbursed to either the property developer’s or seller’s account.

The NRI can repay the loan using funds in an NRI’s, NRE, NRO account or FCNR (Foreign Currency Non Resident) deposits. Remember that NRO account is taxable whilst interest earned on NRE account is subject to tax exemption. Interest that is earned from your FCNR deposit shall be subject to tax exemption till you hold NRI or Resident and Not Ordinarily Resident (RNOR) status. It is important for the NRIs to understand how tax is calculated when he or she sells property in India.  

An understanding of Long-term capital gains and Short-term capital gains taxes are equally important. There is exemption under Section 54, Indian Income-tax Act provided in the case of a long term capital gain on the sale of house property of the NRI. The house property may be rented out or self-occupied. The exemption under section 54 does not apply for properties purchased or constructed outside India in order to claim this exemption.

Further, knowing about Notional rent is important. Notional rent is the rent which an NRI is   presumed to earn from a residential property even if he or she does not happen to actually earn any form of rent. This rent is also subject to taxation as per the Indian Income Tax Act, 1961. If you’re an NRI selling property in India, count on us for all property management services for NRI.